| Delaware(State or other jurisdiction of incorporation or organization) | 94-2790442(I.R.S. Employer Identification No.) |
|------------------------------------------------------------------------|------------------------------------------------|

| 275 Shoreline Drive, Suite 500 Redwood Shores, California(Address of principal executive offices) |   | 94065(Zip Code) |
|---------------------------------------------------------------------------------------------------|--------|-----------------|

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|                                                                                                                 | Page     |
|----------------------------------------------------------------------------------------------------------------------|----------|
| PART I                                                                                                               | 3        |
| Item 1. Business                                                                                                     | 3        |
| Item 1A. Risk Factors                                                                                                | 8        |
| Item 1B.  Unresolved Staff Comments                                                                        | 9        |
| Item 2. Properties                                                                                                   | 9        |
| Item 3. Legal Proceedings                                                                                            | 9        |
| PART II                                                                                                              | 9        |
| Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 9        |
| Item 6. Selected Financial Data                                                                                      | 10       |
| Item 7. Management's Discussion and Analysis of Financial Conditionand Results of Operations                         |  10 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                  | 20       |
| Item 8. Consolidated Financial Statements and Supplementary Data                                                     | 20       |
| Item 9. Changes in and Disagreements with Accountants on Accountingand Financial Disclosure                          |  20 |
| Item 9A. Controls and Procedures                                                                                     | 20       |
| Item 9B.  Other Information                                                                                | 21       |
| PART III                                                                                                             | 22       |
| Item 10. Directors and Executive Officers and Corporate Governance                                                   | 22       |
| Item 11. Executive Compensation                                                                                      | 24       |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              | 29       |
| Item 13. Certain Relationships and Related Transactions and Director Independence                                    | 31       |
| Item 14. Principal Accountant Fees and Services                                                                      | 34       |
| PART IV                                                                                                              | 35       |
| Item 15. Exhibits                                                                                                    | 35       |

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|   | SignatureOne Profile Server | SignatureOne Profile Server is the server compliment to CIC's Sign-it software, which enables the real-time capture of electronic and digital signatures in various application environments. All user enrollment, authentication and transaction tracking in SignatureOne are based on data from the Sign-it client software. |   |
|--------|-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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|   | SignatureOne Ceremony Server | The SignatureOne Ceremony Server is a J2EEâ server product that provides the capability to define and manage an electronic signature process within a Service Oriented Architecture to be implemented in an On-Premise Deployed Model or through a Software as a Service (SaaS) environment. This product enables the use of web services to facilitate end to end management of multi-party approvals of documents. |   |
|--------|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | iSign                        | A suite of application development tools for electronic digitized signatures, biometric signature verification and cryptography for custom developed applications and web based development.                                                                                                                                                                                                                              |   |
|   | Sign-it                      | Multi-modal electronic signature software for common applications including; Microsoft Word, Adobe Acrobat, , web based applications using HTML, XML, & XHTML, and custom applications for .NET, C# and similar development environments for the enterprise market                                                                                                                                                    |   |

| iSign® v4.3.0.1                                     |
|----------------------------------------------------------|
| iSign® v4.3.1.2                                     |
| iSign® v4.3.1.3                                     |
| iSign® v4.4                                         |
| SignatureOne®  Sign-it® XF v2.1 Java      |
| SignatureOne® Ceremony® Server v1.13           |
| SignatureOne® Ceremony® Server v1.2.1          |
| SignatureOne® Ceremony® Server v1.2.2          |
| SignatureOne® Ceremony® Server v1.4            |
| SignatureOne® Ceremony® Server v1.5            |
| SignatureOne® Ceremony® Server v1.5.1          |
| SignatureOne® Sign-it® v7.1 for Acrobat®  |
| SignatureOne® Sign-it® v7.11 for Acrobat® |
| SignatureOne® Sign-it® v7.12 for Acrobat® |
| SignatureOne® Sign-it® v7.2 for Acrobat®  |
| Sign-it® Viewer v2.2 for Acrobat®              |

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|   | Patent No. | Expiration |   |
|--------|------------|------------|--------|
|   | 5544255    | 2013       |   |
|   | 5647017    | 2014       |   |
|   | 5818955    | 2015       |   |
|   | 5933514    | 2016       |   |
|   | 6064751    | 2017       |   |
|   | 6091835    | 2017       |   |
|   | 6212295    | 2018       |   |
|   | 6381344    | 2019       |   |
|   | 6487310    | 2019       |   |

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| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
|---------|--------------------------------------------------------------------------------------------------------------|

|   | Market Information |
|--------|--------------------|

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Sale PricePer Share     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| Year   | Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | High                    | Low |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                    |   |
| 2008   | First Quarter                                                                                                | $   0.27 |     $   0.13 |
|   | Second Quarter                                                                                               | $   0.27 |     $   0.13 |
|   | Third Quarter                                                                                                | $   0.23 |     $   0.10 |
|   | Fourth Quarter                                                                                               | $   0.16 |     $   0.05 |
| 2009   | First Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $   0.12 |     $   0.04 |
|   | Second Quarter                                                                                               | $   0.11 |     $   0.05 |
|   | Third Quarter                                                                                                | $   0.18 |     $   0.07 |
|   | Fourth Quarter                                                                                               | $   0.23 |     $   0.10 |

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| ·   | whether there are legal, regulatory or contractual provisions known to the Company that limit the useful life of any patent to less than the assigned useful life; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether the Company needs to incur material costs or make modifications in order for it to continue to be able to realize the protection afforded by the patents; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether any effects of obsolescence or significant competitive pressure on the Company’s current or future products are expected to reduce the anticipated cash flow from the products covered by the patents; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether demand for products utilizing the patented technology will diminish, remain stable or increase; and |
|--------------------|-------------------------------------------------------------------------------------------------------------|

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| ·   | whether the current markets for the products based on the patented technology will remain constant or will change over the useful lives assigned to the patents. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                               |   | Payments due by period |   |
|------------------------------------|--------|------------------------|--------|
| Contractual obligations            |   | Total                  |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2014 |   |   | Thereafter |   |
| Short-term debt related party (1)  |   | $                      | 5,091  |   |   | $ | 5,091 |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |
| Operating lease commitments (2)    |   |                   | 532    |   |   |   | 292 |   |   |   | 240 |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Total contractual cash obligations |   | $                      | 5,623  |   |   | $ | 5,383 |   |   | $ | 240 |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |

| 1.   | Short-term debt reported on the balance sheet is net of approximately $2,222 in discounts representing the fair value of warrants issued in connection with the Company’s debt financings. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The base rent will increase approximately 3% per annum over the term of the lease, which expires on October 31, 2011. |
|----------------|-----------------------------------------------------------------------------------------------------------------------|

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| Name                                    | Age | Year First Electedor Appointed |
|-----------------------------------------|-----|--------------------------------|
| Guido D. DiGregorio (5)                 | 71  | 1997                           |
| Kurt Amundson (1), (2), (3) (4)         | 57  | 2009                           |
| Louis P. Panetta (1), (2), (3), (4) (5) | 60  | 2000                           |
| David E. Welch (1), (4), (3)            | 62  | 2004                           |

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|   |  Name          |  Age |  Positions Currently Held                                     |   |
|--------|---------------------|-----------|--------------------------------------------------------------------|--------|
|   |                |      |                                                               |   |
|   | Guido D. DiGregorio | 71        | Chairman of the Board,Chief Executive Officer and President        |   |
|   | Francis V. Dane     | 59        | Chief Legal Officer,Secretary and Chief Financial Officer          |   |
|   | Russel L. Davis     | 45        | Chief Technology Officer & Vice President, Product Development |   |

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|      Name andPrincipalPosition |        Year |       Salary($) |       Bonus($) |      StockAwards($) |      OptionAwards($) (3) |     Non-EquityIncentive PlanCompensation($) | Change inPension ValueAndNonqualifiedDeferred CompensationEarnings($) |      All OtherCompensation($) |       Total($) |
|---------------------------------------------------------|------------------------------------------------|-----------------------------------------------|----------------------------------------------|----------------------------------------------|---------------------------------------------------|-----------------------------------------------------------------|-----------------------------------------------------------------------|--------------------------------------------------------|----------------------------------------------|
|  Guido DiGregorioPresident & CEO               |  20092008                            |  285,000(1)285,000(1)               |  −−                    |  −−                    |  51,29740,200                           |  −−                                       |  −−                                             |  10,38810,055                                |  346,685335,255                    |
|  Frank DaneCLO & CFO                           |  20092008                            |  145,500160,000                     |  −−                    |  −−                    |  14,48420,100                           |  −−                                       |  −−                                             |   − −                  |  159,984180,100                    |
|  Russel DavisCTO                                   |  20092008                            |  154,900165,000                     |  35,000(2)25,000(2)                |  −−                    |  9,95830,150                            |  −−                                       |  −−                                             |   − −                  |  199,858220,150                    |

| 1.   | Mr. DiGregorio 2009 salary includes $85,000, paid in June 2009 that he voluntarily deferred from his 2008 salary.  Mr. DiGregorio gave up 18% of his 2009 salary or $50,000 as part of the overall Company salary reduction per the May 2009 financing.  The remaining $35,000 of his 2009 salary is voluntary deferred to March of 2010. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 2.   | The bonus payment in 2009 recognizes Mr. Davis as the chief architect and driving force behind the product development and recent sales of CIC’s highly differentiated SignatureOne Ceremony Server (third generation product). The Company is still in the technology/product sell stage and Mr. Davis is expected, to continue to play a key role with customers’ CIO’s and technical teams in the sales process. The bonus payment in 2008 was for leading the design and development effort and delivery ahead of schedule of the SignatureOne Ceremony Server product which was the basis for closing two orders with top-tier insurance companies which contributed over $1,000,000 to last half of 2008 revenue. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The amounts provided in this column represent the aggregate grant date fair value of option awards granted to our officers in the fiscal year ended December 31, 2009 as calculated in accordance with FASB ASC Topic 718, Stock Compensation. Mr. DiGregorio has 2,739,077 options that are vested and exercisable within sixty days of December 31, 2009.  Mr. Dane has 735,948 options that are vested and exercisable within sixty days of December 31, 2009. Mr. Davis has 921,529 options that are vested and exercisable within sixty days of December 31, 2009. In accordance with applicable regulations, the value of such options does not reflect an estimate for features related to service-based vesting used by the Company for financial statement purposes. See footnote 6 in the Notes to Consolidated Financial Statements included with this report on Form 10-K. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |     Name andPrincipalPosition | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable                                                                                                                                                                                                                                                                                      | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable                                                                                                                                                               |     OptionExercisePrice ($) (4)                                                                                                                                                                                                                                                                                                                                                     |     OptionExpirationDate (5)                                                                                                                                 |
|--------|---------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Guido DiGregorio, President & CEO (1)         | 1,275,000   425,000   354,545   184,701    69,646     63,721     56,567     53,202     34,613    24,926    21,619    23,347    29,737    37,107    44,437 |  − − 245,455 − − − − − − − − − − −  −                     | $  0.75$  0..39$   0.15$   0.08$   0.07$   0.08$   0.08$   0.09$   0.13$   0.18$   0.19$   0.18$   0.15$   0.12$   0.10                                                          | 12/19/201212/19/2012  07/25/201507/15/201207/31/201208/14/201208/31/201209/15/201209/30/201210/15/201210/30/201211/13/201211/30/201212/15/201212/31/2009               |
|   | Frank Dane, CLO & CFO (2)                     | 100,000100,000  35,985107,958177,272  52,151  19,665  17,922  15,972  15,022    9,733    7,038    6,104    6,593    8,396  10,478  12,547                                                                                            |  − − − − 122,728 − − − − − − − − − − − − | $   0.33$   0.55$   0.39$   0.75$   0.15$   0.08$   0.07$   0.08$   0.08$   0.09$   0.13$   0.18$   0.19$   0.18$   0.15$   0.12$   0.10 | 05/08/201011/11/201112/19/201212/19/201207/25/201507/15/201207/31/201208/14/201208/31/201209/15/201209/30/201210/15/201210/30/201211/13/201211/30/201212/15/201212/31/2009  |
|   | Russel Davis, CTO (3)                             | 125,000375,000265,909  35,854  13,520  12,369  10,980  10,328    6,719    4,839    4,197    4,532    5,772    7,203    8,626                                                                                     |  − − 184,091 − − − − − − − − − − − −                           | $   0.57$   0.75$   0.15$   0.08$   0.07$   0.08$   0.08$   0.09$   0.13$   0.18$   0.19$   0.18$   0.15$   0.12$   0.10                                               | 08/31/201208/31/201207/25/201507/15/201207/31/201208/14/201208/31/201209/15/201209/30/201210/15/201210/30/201211/13/201211/30/201212/15/201212/31/2009                      |

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|        Name  |     Fees EarnedOr Paid inCash($)                 |      StockAwards($)                   |      OptionAwards($)(7) |    Non-EquityIncentivePlanCompensation($)       |  Change in PensionValue andNonqualified DeferredCompensationEarnings($) |      All OtherCompensation($)         |       Total($) |
|-------------------------------------------------|----------------------------------------------------------------------|----------------------------------------------------------------|--------------------------------------------------|----------------------------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------------------------|----------------------------------------------|
|  Kurt Amundson (1)                         |  $      1,000                     |                                                           |  $      6,070 |  $        − |  $        −               |  $        − |  $7,070                                 |
|  Garry Meyer (2)(3)                        |  $      1,000                     |  $        − |  $      3,470 |  $        − |  $        −               |  $        − |  $4,470                                 |
|  Louis P. Panetta (4)                      |  $      2,000                     |  $        − |  $      3,470 |  $        − |  $        −               |  $        − |  $5,470                                 |
|  David E. Welch (5)                        |  $      2,000                          |  $        − |  $      3.470 |  $        − |  $        −               |  $        − |  $5,470                                 |
|  C. B. Sung  Former Director (6) |  $         − |  $        − |  $      3,470 |  $        − |  $        −               |  $        − |  $3,470                                 |

|   | 1.   Mr. Amundson holds options to acquire 75,000 shares of stock at December 31, 2009, all of which are vested.  Of such shares, 25,000 were granted to Mr. Amundson pursuant to a consulting agreement in August 2009, prior to his appointment to the Board. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.   Mr. Meyer holds options to acquire 125,000 shares of stock at December 31, 2009, all of which were vested. |
|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | 3.   Mr. Meyer died on January 20, 2010. |
|--------|---------------------------------------------------------|

|   | 4.   Mr. Panetta holds options to acquire 250,000 shares of stock at December 31, 2009, all of which were vested. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | 5.   Mr. Welch holds options to acquire 225,000 shares of stock at December 31, 2009, all of which were vested. |
|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | 6.   Mr. Sung resigned from the Board in September 2009. |
|--------|-------------------------------------------------------------------------|

|   | 7.   The amounts provided in this column represent the aggregate grant date fair value of option awards granted to our directors in the fiscal year ended December 31, 2009 as calculated in accordance with FASB ASC Topic 718, Stock Compensation.  The aggregate number of option awards outstanding for each director and former director as of December 31, 2009 is as follows: Mr. Amundson – 75,000; Mr. Meyer – 125,000; Mr. Panetta – 250,000; Mr. Welch – 225000; and Mr. Sung – 0. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Common Stock      |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|
| Name of Beneficial Owner                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Numberof Shares** |       |   | Percentof Class** |   |
| Guido DiGregorio (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |              | 2,882,977  |   |   |   | 1.49 | % |
| Kurt Amundson (2)                                                                               |   |              | 75,000     |   |   |   | * |   |
| Louis P. Panetta (3)                                                                            |   |              | 250,000    |   |   |   | * |   |
| David E. Welch (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |              | 225,000    |   |   |   | * |   |
| Francis V. Dane (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |              | 736,160    |   |   |   | * |   |
| Russel L. Davis (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |              | 921,529    |   |   |   | * |   |
| All directors and executive officers as a group (6 persons)                                                                                                                                                                                                                                                                                                                                                                                                                            |   |              | 5,090,666  |   |   |   | 2.60 | % |
| 5% Shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |              |       |   |   |   |   |   |
| Phoenix Venture Fund LLC (7)                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              | 66,439,342 |   |   |   | 25.83 | % |
| Michael W. Engmann (8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |              | 20,360,527 |   |   |   | 9.64 | % |

| (1)   | Represents (a) 143,900 shares held by Mr. DiGregorio and (b) 2,739,077 shares issuable upon the exercise of stock options exercisable within 60 days hereof. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents 75,000 shares issuable upon the exercise of options exercisable within 60 days hereof. |
|-----------------|---------------------------------------------------------------------------------------------------|

| (3)   | Represents 250,000 shares issuable upon the exercise of options exercisable within 60 days hereof. |
|-----------------|----------------------------------------------------------------------------------------------------|

| (4)   | Represents 225,000 shares issuable upon the exercise of stock options exercisable within 60 days hereof. |
|-----------------|----------------------------------------------------------------------------------------------------------|

| (5)   | Represents (a) 212 shares held by Mr. Dane and (b) 735,948 shares issuable upon the exercise of stock options exercisable within 60 days hereof. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | Represents 921,529 shares issuable upon the exercise of stock options within 60 days hereof. |
|-----------------|----------------------------------------------------------------------------------------------|

| (7)   | Represents (a) 65,076,054 shares held by SG Phoenix Ventures LLC and (b) 1,363,288 shares issuable upon the exercise of warrants. SG Phoenix Ventures LLC is the Managing Member of Phoenix Venture Fund LLC (the “Phoenix Fund”), with the power to vote and dispose of the shares of Common Stock held by the Phoenix Fund. Accordingly, SG Phoenix Ventures LLC may be deemed to be the beneficial owner of such shares. Andrea Goren is the co-manager of SG Phoenix Ventures LLC, has the shared power to vote and dispose of the shares of Common Stock held by the Phoenix Fund and, as such, may be deemed to be the beneficial owner of the common shares owned by the Phoenix Fund. Philip Sassower is the co-manager of SG Phoenix Ventures |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (1)   | Represents (a) 8,852,853 shares beneficially owned by Mr. Engmann, of which 585,808 are held by MDNH Partners, L.P. and 1,171,617 are held by KENDU Partners Company, (b) 7,687,003 warrants beneficially owned by Mr. Engmann, of which 1,228,180 are held by MDNH Partners, L.P. and 1,739,638 are held by KENDU Partners Company, and (c) 3,820,671 shares issuable upon the conversion of shares of Series A-1 Preferred beneficially owned by Mr. Engmann, of which 1,159,745 are issuable to MDNH Partners, L.P. and 2,628,760 are issuable to KENDU Partners Company. Mr. Engmann holds outstanding warrants to purchase 2,333,250 shares of the Company’s Common Stock at $0.51 per share, warrants to purchase 1,979,936 shares of the Company’s Common Stock at $0.25 per share and warrants to purchase 405,999 shares of the Company’s Common Stock at $0.06 per share. MDNH Partners, L.P. holds outstanding warrants to purchase 1,659,200 shares of the Company’s Common Stock at $0.51 per share, warrants to purchase 1,187,962 shares of the Company’s Common Stock at $0.25 per share, and warrants to purchase 40,218 shares of the Company’s Common Stock at $0.06 per share.  KENDU Partners Company holds outstanding warrants to purchase 1,659,200 shares of the Company’s Common Stock at $0.51 per share, and warrants to purchase 80,438 shares of the Company’s Common Stock at $0.06 per share. In addition, Mr. Engmann, MDNH Partners, L.P. and KENDU Partners Company converted a portion of outstanding indebtedness and interest accrued thereon into shares of Series A-1 Preferred in connection with the Company’s June 2008 financing transaction.  In addition, the Company has paid the 2009 interest in kind, which resulted in the issuance of additional shares of Series A-1 Preferred to Mr. Engmann, MDNH Partners, L.P. and KENDU Partners Company. Each share of Series A-1 Preferred held by Mr. Engmann, MDNH Partners, L.P. and KENDU Partners Company is presently convertible into 7.1429 shares of Common Stock. Mr. Engmann holds 4,503 shares of Series A-1 Preferred that can be converted into 32,166 shares of Common Stock. MDNH Partners, L.P. holds 162,364 shares of Series A-1 Preferred that are convertible into 1,159,745 common shares at $0.14 per share. KENDU Partners Company holds 368,026 shares of Series A-1 Preferred that are convertible into 2,628,760 common shares at $0.14 per share.  Mr. Engmann’s address is 220 Bush Street, No. 660, San Francisco, CA 94104. (See note 5 to the Consolidated Financial Statements). |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                             | Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price Of Outstanding Options, Warrants and Rights                                                         | Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans |
|------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
| Equity Compensation Plans Approved by Security Holders           |                                                                                        |                                                                                                                                |                                                                                         |
|  1999 Stock Option Plan                                     |  2,448                                                                                 |            $          0.58 |               −  |
|  Equity Compensation Plans Not Approved by Security Holders |  7,783                                                                                 |            $          0.27 |         4,262                                             |
|                                                             |                                                                                        |                                                                                                                                |                                                                                         |
| Total:                                                           | 10,231                                                                                      |           $          0.34       |             4,262                |
|                                                             |                                                                                        |                                                                                                                                |                                                                                         |

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|               | Amount and percentage of fees |
|--------------------|-------------------------------|
| Nature of Services | 2009                          |   | 2008 |
|               |                          |   |   |   |   |
| Audit Fees         | Audit fees are expected to be |     $       140,000    (91%) |   | Audit Fees |     $      136,000  (92%) |
| Audit-Related Fees |                          |     $           5,000    (3%) |   | Audit-Related fees |     $          − |
| Tax Fees           | Tax fees are expected to be   |     $           9,000     (6%) |   | Tax Fees |     $          9,000  (6%) |
| All Other Fees     |                          |     $                 − |   | All Other Fees |     $                 − |
| Total              |                          |     $      154,000 |   | Total |     $      145,000 |

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|   |                                                                                                           | Page   |
|--------|----------------------------------------------------------------------------------------------------------------|--------|
| (a)(1) | Financial Statements                                                                                           |   |
|   | Report of GHP Horwath, P.C., Independent Registered Public Accounting Firm                                     | F-1    |
|   | Consolidated Balance Sheets at December 31, 2009 and 2008                                                 | F-2    |
|   | Consolidated Statements of Operations for the years ended December 31, 2009 and 2008                      | F-3    |
|   | Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2009 and 2008 | F-4    |
|   | Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008                      | F-5    |
|   | Notes to Consolidated Financial Statements                                                                     | F-7    |

| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1           | Certificate of Incorporation of the Company, as amended, incorporated herein by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 to the Company's Registration Statement on Form 10 (File No. 000-19301).                                                                                                                                                                                                          |
| 3.2           | Certificate of Amendment to the Company's Certificate of Incorporation (authorizing the reclassification of the Class A Common Stock and Class B Common Stock into one class of Common Stock) filed with the Delaware Secretary of State on November 1, 1991, incorporated herein by reference to Exhibit 3 to Amendment 1 on Form 8 to the Company's Form 8-A (File No. 000-19301). |
| 3.3           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State June 12, 1998, incorporated herein by reference to Exhibit 10.24 to the Company’s 1998 Form 10-K filed on April 6, 1999.                                                                                                                                             |
| 3.4           | By-laws of the Company adopted on October 6, 1986, incorporated herein by reference to Exhibit 3.5 to the Company's Registration Statement on Form 10 (File No. 000-19301).                                                                                                                                                                                                                              |
| 3.5           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State January 24, 2001, incorporated herein by reference to Exhibit 3.5 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.                                                                                                                    |
| 3.6           | Certificate of Elimination of the Company’s Certificate of Designation of the Series A Preferred Stock filed with the Delaware Secretary of State August 17, 2001, incorporated herein by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.                                                                                                          |
| 3.7           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State August 17, 2007, incorporated herein by reference to Exhibit 3.7 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.                                                                                                                     |
| 3.8           | Amended and Restated Certificate of Incorporation of the Company filed with the Delaware Secretary of State on May 18, 1995, incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                                                             |
| 3.9           | Certificate of Designations, Powers, Preferences and Rights of the Series A Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on June 4, 2008, incorporated herein by reference to Exhibit 4.23 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                          |

----

| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                                    |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.10          | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2008, incorporated herein by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                     |
| 3.11          | Certificate of Designations, Powers, Preferences and Rights of the Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on October 30, 2008., incorporated herein by reference to Exhibit 3.11 to the Company’s Annual Report on Form 10-K filed on March 12, 2009. |
| 3.12          | Certificate of Elimination of the Company’s Series A Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on December 30, 2008, incorporated herein by reference to Exhibit 3.12 to the Company’s Annual Report on Form 10-K filed on March 12, 2009.                    |
| 3.13          | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2009, incorporated herein by reference to Exhibit 3.13 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                    |
| †4.10   | 1999 Stock Option Plan, as amended, incorporated herein by reference to Exhibit 4.2 to the Company's Form S-8 filed on September 19, 2008.                                                                                                                                                                        |
| 4.11          | Form of Convertible Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.3 to the Company's Form 8-K filed on November 3, 2004.                                                                                                                                             |
| 4.12          | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.4 to the Company's Form 8-K filed on November 3, 2004.                                                                                                                                                                 |
| 4.13          | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company's Form 8-K filed on August 12, 2006.                                                                                                                                                              |
| 4.14          | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.37 to the Company's Form 8-K filed on August 12, 2006.                                                                                                                                                                      |
| 4.15          | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company’s Form 8-K filed on February 9, 2007.                                                                                                                                                       |
| 4.16          | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.37 to the Company’s Form 8-K filed on February 9, 2007.                                                                                                                                                               |
| 4.17          | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company’s Form 8-K filed on June 20, 2007.                                                                                                                                                          |
| 4.18          | Form of Warrant issued the Company, incorporated herein by reference to Exhibit 10.37 to the Company’s Form 8-K filed on June 20, 2007.                                                                                                                                                                     |
| 4.19          | Form of Common Stock Purchase Warrant issued by the Company, incorporated herein by reference to Exhibit 4.19 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                      |
| 4.20          | Form of Additional Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.20 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                                 |
| 4.21          | Form of Secured Promissory Note issued by the Company dated June 5, 2008, incorporated herein by reference to Exhibit 4.21 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                         |
| 4.22          | Form of Additional Secured Promissory Note, incorporated herein by reference to Exhibit 4.22 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                                       |
| 4.23          | Certificate of Designations, Powers, Preferences and Rights of the Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on October 30, 2008, incorporated herein by reference to Exhibit 4.23 to the Company’s Annual Report on Form 10-K filed on March 12, 2009.. |
| 4.24          | Form of Secured Promissory Note issued by the Company dated May 28, 2009, incorporated herein by reference to Exhibit 4.24 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                                                         |

----

| ExhibitNumber              |  Document                                                                                                                                                                                                                                   |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.25                       | Form of Additional Secured Promissory Note, incorporated herein by reference to Exhibit 4.25 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                      |
| 4.26                       | Form of Common Stock Purchase Warrant issued by the Company, incorporated herein by reference to Exhibit 4.26 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                     |
| 4.27                       | Form of Additional Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.27 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                |
| ††10.19        | Software Development and License Agreement dated December 4, 1998 between Ericsson Mobile Communications AB and the Company incorporated herein by reference to Exhibit 10.26 of the Company's 1998 Form 10-K (File No. 0-19301). |
| 10.24                      | Form of Note and Warrant Purchase Agreement dated October 28, 2004, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed on November 3, 2004.   |
| 10.25                      | Form of Registration Rights Agreement dated October 28, 2004, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K filed on November 3, 2004.            |
| 10.26                      | Form of Note and Warrant Purchase Agreement dated August 10, 2006, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on August 12, 2006.         |
| 10.26                      | Form of Note and Warrant Purchase Agreement dated August 10, 2006, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on August 12, 2006.         |
| 10.27                      | Form of Registration Rights Agreement dated August 10, 2006, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on August 12, 2006.                  |
| †††10.28 | Amendment dated May 31, 2005 to the License agreement dated December 22, 2000 between the Company and eCom Asia Pacific, Ltd., incorporated by reference to Exhibit 10.26 of the Company’s Form 10-K/A filed on September 15, 2005.        |
| †††10.29 | License agreement dated June 2, 2005 between the Company and SnapOn Credit LLC, incorporated herein by reference to Exhibit 10.27 of the Company’s Form 10-K/A filed on September 15, 2005.                                                |
| †10.30               | Amendment to employment agreement with Guido DiGregorio, incorporated herein by reference to the Company's Form 8-K filed on September 21, 2005.                                                                                                 |
| †10.31               | Amendment to employment agreement with Francis V. Dane, incorporated herein by reference to the Company's Form 8-K filed on September 21, 2005.                                                                                                  |
| †10.32               | Form of stock option agreement dated August 31, 2005 with Russel L. Davis, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                            |
| †10.33               | Form of stock option agreement dated December 19, 2005 with Guido DiGregorio, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                         |
| †10.34               | Form of stock option agreement dated August 31, 2005 with Francis V. Dane, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                            |
| †10.35               | Form of stock option agreement dated August 31, 2005 with C. B. Sung, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                                 |
| 10.36                      | Form of Note and Warrant Purchase Agreement dated February 5, 2007, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on February 5, 2007.       |
| 10.37                      | Form of Registration Rights Agreement dated February 5, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on February 5, 2007.                |
| 10.38                      | Amendment to the Note and Warrant Purchase Agreement dated February 5, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 99.1 to the Company's Form 8-K filed on March 15, 2007.    |

----

| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                           |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.39         | Form of Note and Warrant Purchase Agreement dated June 15, 2007, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on June 15, 2007.                                                                     |
| 10.40         | Form of Registration Rights Agreement dated June 15, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on June 15, 2007.                                                                              |
| 10.41         | Form of Securities Purchase and Registration Rights Agreement dated August 24, 2007, by and among the Company and Phoenix Venture Fund LLC, incorporated herein by reference to Exhibit 10.36 to the Company's Form 8-K filed on August 27, 2007.                                                        |
| †10.42  | Consulting Agreement dated January 9, 2008 between the Company and GS Meyer & Associates LLC - Incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed on March 12, 2007.                                                                                 |
| 10.43         | Credit Agreement dated June 5, 2008, by and among the Company and the Lenders Party Hereto and SG Phoenix as Collateral Agent, incorporated herein by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                          |
| 10.44         | Pledge and Security Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                          |
| 10.44         | Securities Purchase Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                          |
| 10.45         | Registration Rights Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.44 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                          |
| 10.46         | Amendment No. 1 to Credit Agreement dated May 28, 2009, by and among the Company, the Lenders and Additional Lenders Parties Hereto and SG Phoenix as Collateral Agent, incorporated herein by reference to Exhibit 10.46 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009. |
| 10.47         | Amendment No. 1 to Registration Rights Agreement dated May 28, 2009, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                       |
| 10.48         | Salary Reduction Plan for Executive Officers of Communication Intelligence Corporation under Amendment No. 1 to Credit Agreement dated May 28, 2009, incorporated herein by reference to Exhibit 10.48 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                    |
| 14.1          | Code of Ethics, incorporated by reference to Exhibit 14 to the Company’s Annual Report on Form 10-K filed on March 30, 2004.                                                                                                                                                                       |
| *21.1         | Schedule of Subsidiaries.                                                                                                                                                                                                                                                                                |
| *23.1         | Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm.                                                                                                                                                                                                                             |
| *31.1         | Certification of Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                       |
| *31.2         | Certificate of Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                         |
| *32.1         | Certification of Chief Executive Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                           |
| *32.2         | Certification of Chief Financial Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                           |

| * | Filed herewith. |
|---|-----------------|

| † | Indicates management contract or compensatory plan, contract or arrangement. |
|---------|------------------------------------------------------------------------------|

----

| †† | Confidential treatment of certain portions of this exhibit have been requested from the SEC pursuant to a request for confidentiality dated March 30, 1999, filed pursuant to the Securities and Exchange Act of 1934. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ††† | Confidential treatment of certain portions of this exhibit have been requested from the SEC pursuant to a request for confidentiality dated March 30, 2006 filed pursuant to the Securities and Exchange Act of 1934. |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) Exhibits |
|--------|--------------|

----

|   | Communication Intelligence Corp. |
|--------|----------------------------------|
|   | By:                              |  /s/ Francis V. DaneFrancis V. Dane(Principal Financial Officer and Officer Duly Authorized to Sign on Behalf of the Registrant) |

| Signature                                  | Title                                                                                             |
|--------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                       |                                                                                              |
|  /s/ Guido DiGregorioGuido DiGregorio |  Chairman, President and Chief Executive Officer(Principal Executive Officer)                |
|  /s/ Francis V. DaneFrancis V. Dane   |  Chief Legal Officer and Chief Financial Officer(Principal Financial and Accounting Officer) |
|  /s/ Kurt AmundsonKurt Amundson       |  Director                                                                                    |
|  /s/ Louis P. PanettaLouis P. Panetta |  Director                                                                                    |
|  /s/ David WelchDavid Welch           |  Director                                                                                    |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | December 31, |         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2009         |         |   | 2008 |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |         |   |   |   |
| Current assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |         |         |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $            | 1,021        |   |   | $ | 929 |   |
| Accounts receivable, net of allowance of $117 and $104 at December 31, 2009 and 2008, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |         | 227          |   |   |   | 700 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 66           |   |   |   | 80 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 1,314        |   |   |   | 1,709 |   |
| Property and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         | 31           |   |   |   | 48 |   |
| Patents, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |         | 2,771        |   |   |   | 3,149 |   |
| Capitalized software development costs, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         | 1,515        |   |   |   | 1,406 |   |
| Deferred financing costs (Note 3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |         | 218          |   |   |   | 301 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |         | 29           |   |   |   | 30 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total assets                                                                                        |   | $            | 5,878        |   |   | $ | 6,643 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Short-term debt, net of discount of $5 at December 31 2008 (Note 3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |         | −      |   |   |   | 60 |   |
| Current portion of long-term debt –net of discount of $2,222, including related party debt of $4,918, net of discount of $2,138 at December 31, 2009 (Note 3)                                                                                                                                                                                                                                                                                                                                                                                    |   |         | 2,869        |   |   |   | − |   |
| Accounts payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         | 118          |   |   |   | 92 |   |
| Accrued compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 327          |   |   |   | 369 |   |
| Other accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 169          |   |   |   | 236 |   |
| Deferred revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         | 458          |   |   |   | 343 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 3,941        |   |   |   | 1,100 |   |
| Long-term debt –net of discount of $873, including related party debt of $2,644, net of discount of $834 at December 31, 2008 (Note 3)                                                                                                                                                                                                                                                                                                                                                                                                           |   |         | −      |   |   |   | 2,765 |   |
| Deferred revenue long-term                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 867          |   |   |   | − |   |
| Derivative liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 422          |   |   |   | − |   |
| Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |         | 5,230        |   |   |   | 3,865 |   |
| Commitments and contingencies (Note 6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |         |   |   |   |   |   |
| Stockholders' equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |         |         |   |   |   |   |   |
| Preferred stock, $.01 par value; 10,000 shares authorized; 751 and 856 shares outstanding at December 31, 2009 and 2008, respectively ($751 liquidation preference at December 31, 2009)                                                                                                                                                                                                                                                                                                                                                               |   |         |   751   |   |   |   |   856 |   |
| Common stock, $.01 par value; 225,000 shares authorized; 190,026 and 130,374 shares issued and outstanding at December 31, 2009 and 2008, respectively                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |   1,900 |   |   |   |   1,304 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 101,221      |   |   |   | 95,174 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |         | (103,178     | ) |   |   | (94,569 | ) |
| Accumulated other comprehensive (loss) income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         | (46          | ) |   |   | 13 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total stockholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 648          |   |   |   | 2,778 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $            | 5,878        |   |   | $ | 6,643 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |

----

|                                                                   |   | Years Ended December 31, |    |
|------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                   |   | 2009                     |    |   | 2008 |   |
| Revenue:                                                               |   |                     |    |   |   |   |
| Product                                                                |   | $                        | 1,185   |   |   | $ | 1,686 |   |
| Maintenance                                                            |   |                     | 751     |   |   |   | 715 |   |
|                                                                   |   |                     | 1,936   |   |   |   | 2,401 |   |
| Operating costs and expenses:                                          |   |                     |    |   |   |   |   |   |
| Cost of sales:                                                         |   |                     |    |   |   |   |   |   |
| Product                                                                |   |                     | 724     |   |   |   | 895 |   |
| Maintenance                                                            |   |                     | 161     |   |   |   | 169 |   |
| Research and development                                               |   |                     | 343     |   |   |   | 198 |   |
| Sales and marketing                                                    |   |                     | 1,501   |   |   |   | 1,353 |   |
| General and administrative                                             |   |                     | 1,977   |   |   |   | 2,030 |   |
|                                                                   |   |                     |    |   |   |   |   |   |
|                                                                   |   |                     | 4,706   |   |   |   | 4,645 |   |
|                                                                   |   |                     |    |   |   |   |   |   |
| Loss from operations                                                   |   |                     | (2,770  | ) |   |   | (2,244 | ) |
|                                                                   |   |                     |    |   |   |   |   |   |
| Interest and other income, net                                         |   |                     | 2       |   |   |   | 72 |   |
| Interest expense:                                                      |   |                     |    |   |   |   |   |   |
| Related party (Note 3)                                                 |   |                     | (312    | ) |   |   | (243 | ) |
| Other (Note 3)                                                         |   |                     | (43     | ) |   |   | (45 | ) |
| Amortization of debt discount and deferred financing cost:             |   |                     |    |   |   |   |   |   |
| Related party (Note 3)                                                 |   |                     | (1,600  | ) |   |   | (730 | ) |
| Other (Note 3)                                                         |   |                     | (78     | ) |   |   | (119 | ) |
| Loss on extinguishment of long-term debt                               |   |                     | (829    | ) |   |   | − |   |
| Loss on derivative liability                                           |   |                     | (5,136  | ) |   |   | – |   |
| Net loss                                                               |   |                     | (10,766 | ) |   |   | (3,309 | ) |
| Accretion of beneficial conversion feature, preferred shares (Note 5): |   |                     |    |   |   |   |   |   |
| Related party                                                          |   |                     | – |   |   |   | (273 | ) |
| Other                                                                  |   |                     | – |   |   |   | (98 | ) |
| Preferred stock dividends:                                             |   |                     |    |   |   |   |   |   |
| Related party                                                          |   |                     | (45     | ) |   |   | (34 | ) |
| Other                                                                  |   |                     | (16     | ) |   |   | (13 | ) |
|                                                                   |   |                     |    |   |   |   |   |   |
| Net loss attributable to common stockholders                           |   | $                        | (10,827 | ) |   | $ | (3,727 | ) |
|  Basic and diluted loss per common share                          |   | $                        | (0.08   | ) |   | $ | (0.03 | ) |
|  Weighted average common shares outstanding, basic and diluted    |   |                     | 141,436 |   |   |   | 129,247 |   |
|                                                                   |   |                     |    |   |   |   |   |   |

----

|                                                                                                                                                          |   | PreferredSharesOutstanding |         |   | PreferredSharesAmount |   |         | CommonSharesOutstanding |   |   |  CommonStock |   |   | AdditionalPaid-InCapital |   |   |  AccumulatedDeficit |   |       | AccumulatedOtherComprehensiveIncome (Loss) |   |   |   Total          |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------------|--------|-----------------------|--------|--------------|-------------------------|--------|--------|-------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|------------|--------------------------------------------|--------|--------|----------------------------|--------|
|                                                                                                                                                          |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |
| Balance as of January 1, 2008                                                                                                                                 |   |                       | −      |   |                  | $      | −      |                    |   |   | 129,057           |   |   | $                        | 1,291  |   |                     | $      | 93,785     |                                       |   | $      | (91,260                    | )      |   | $ | (35 | ) |   | $ | 3,781 |   |
|  Stock based employee compensation                                                                                                                       |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | 161        |                                       |   |   |                       |   |   |   |   |   |   |   | 161 |   |
| Fair value of warrants issued in connection with Long-term debt                                                                                               |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | 1,231      |                                       |   |   |                       |   |   |   |   |   |   |   | 1,231 |   |
| Conversion of short-term notes into Preferred shares, net of expenses of $127                                                                                 |   |                       |   1,040 |   |                  |   |   1,040 |                    |   |   |              |   |   |                     |   |   |                     |   | (127       | )                                          |   |   |                       |   |   |   |   |   |   |   |   913 |   |
| Beneficial Conversion Feature associated with the Preferred Shares                                                                                            |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |   371 |                                       |   |   |                       |   |   |   |   |   |   |   |   371 |   |
| Conversion of preferred shares into Common Stock                                                                                                              |   |                       | (184         | )      |                  |   | (184         | )                       |   |   | 1,317             |   |   |                     | 13     |   |                     |   | 171        |                                       |   |   |                       |   |   |   |   |   |   |   | − |   |
| Comprehensive loss:                                                                                                                                           |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                                      |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   | (3,309                     | )      |   |   |   |   |   |   | (3,309 | ) |
| Foreign currency translation adjustment                                                                                                                       |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   | 48 |   |   |   | 48 |   |
| Total comprehensive loss                                                                                                                                      |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   |   |   |   |   | (3,261 | ) |
| Accretion of beneficial conversion feature on preferred stock                                                                                                 |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | (371       | )                                          |   |   |                       |   |   |   |   |   |   |   | (371 | ) |
| Preferred share dividends                                                                                                                                     |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | (47        | )                                          |   |   |                       |   |   |   |   |   |   |   | (47 | ) |
| Balance as of December 31, 2008                                                                                                                               |   |                       | 856          |   |                  |   | 856          |                    |   |   | 130,374           |   |   |                     | 1,304  |   |                     |   | 95,174     |                                       |   |   | (94,569                    | )      |   |   | 13 |   |   |   | 2,778 |   |
| Cumulative effect of change in accounting principle on January 1, 2009 – Reclassification of equity-linked financial instrument to derivative liability |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | (3,510     | )                                          |   |   |       2,157 |   |   |   |   |   |   |   | (1,353 | ) |
| Stock-based employee compensation                                                                                                                             |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | 318        |                                       |   |   |                       |   |   |   |   |   |   |   | 318 |   |
| Conversion of preferred shares                                                                                                                                |   |                       | (166         | )      |                  |   | (166         | )                       |   |   | 1,183             |   |   |                     | 11     |   |                     |   | 155        |                                       |   |   |                       |   |   |   |   |   |   |   | − |   |
| Cancellation of warrants recorded as derivative liability                                                                                                     |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   | 875        |                                       |   |   |                       |   |   |   |   |   |   |   | 875 |   |
| Exercise of stock options                                                                                                                                     |   |                       |         |   |                  |   |         |                    |   |   | 85                |   |   |                     | 1      |   |                     |   | 7          |                                       |   |   |                       |   |   |   |   |   |   |   | 8 |   |
| Exercise of warrants                                                                                                                                          |   |                       |         |   |                  |   |         |                    |   |   | 58,384            |   |   |                     | 584    |   |                     |   | 8,263      |                                       |   |   |                       |   |   |   |   |   |   |   | 8,847 |   |
| Comprehensive loss:                                                                                                                                           |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   |   |   |   |   |   |   |
|  Net loss                                                                                                                                                |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   | (10,766                    | )      |   |   |   |   |   |   | (10,766 | ) |
|  Foreign currency translation adjustment                                                                                                                 |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   | (59 | ) |   |   | (59 | ) |
| Total comprehensive (loss)                                                                                                                                    |   |                       |         |   |                  |   |         |                    |   |   |              |   |   |                     |   |   |                     |   |       |                                       |   |   |                       |   |   |   |   |   |   |   | (10,825 | ) |
| Preferred share dividends, paid in kind                                                                                                                       |   |                       | 61           |   |                  |   | 61           |                    |   |   |              |   |   |                     |   |   |                     |   | (61        | )                                          |   |   |                       |   |   |   |   |   |   |   | − |   |
|  Balances as of December 31, 2009                                                                                                                        |   |                       | 751          |   |                  | $      | 751          |                    |   |   | 190,026           |   |   | $                        | 1,900  |   |                     | $      | 101,221    |                                       |   | $      | (103,178                   | )      |   | $ | (46 | ) |   | $ | 648 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2009   |    |   | 2008   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |    |   |   |   |
| Net loss                                                                                                                                                                                              |   | $      | (10,766 | )      |   | $      | (3,309 | ) |
| Adjustments to reconcile net loss to net cash      provided by (used for) operating activities:                                                                         |   |   |    |   |   |   |   |   |
| Depreciation and amortization                                                                                                                                                                                                  |   |   | 1,107   |   |   |   | 951 |   |
| Amortization of debt discount and deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 1,678   |   |   |   | 848 |   |
| Loss on extinguishment of long term debt                                                                                                                                                                                       |   |   | 829     |   |   |   | - |   |
| Stock based employee compensation                                                                                                                                                                                              |   |   | 318     |   |   |   | 161 |   |
| Loss on derivative liability                                                                                                                                                                                                   |   |   | 5,136   |   |   |   | - |   |
| Non-cash financing expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 337     |   |   |   | - |   |
| Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |    |   |   |   |   |   |
|    Accounts receivable                                                                                                                                                                                          |   |   | 473     |   |   |   | (248 | ) |
|    Prepaid expenses and other assets                                                                                                                                                                            |   |   | 15      |   |   |   | 55 |   |
|    Accounts payable                                                                                                                                                                                             |   |   | 26      |   |   |   | (43 | ) |
|    Accrued compensation                                                                                                                                                                                         |   |   | (42     | )      |   |   | 5 |   |
|    Other accrued liabilities                                                                                                                                                                                    |   |   | (67     | )      |   |   | (106 | ) |
|    Deferred revenue                                                                                                                                                                                             |   |   | 982     |   |   |   | (88 | ) |
| Net cash provided by (used for) operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 26      |   |   |   | (1,774 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |    |   |   |   |   |   |
| Cash flows from investing activities:Acquisition of property and equipment                                                                                                                            |   |   | (8      | )      |   |   | (27 | ) |
| Capitalized software development costs                                                                                                                                                                |   |   | (813    | )      |   |   | (813 | ) |
| Net cash used for investing activities                                                                                                                                                                                         |   |   | (821    | )      |   |   | (840 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |    |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |    |   |   |   |   |   |
| Deferred financing costs                                                                                                                                                                              |   |   | (174    | )      |   |   | (425 | ) |
| Proceeds from issuance of short-term debt                                                                                                                                                             |   |   | -       |   |   |   | 125 |   |
| Proceeds from the exercise of stock options and warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 26      |   |   |   | - |   |
| Proceeds from issuance of long-term debt                                                                                                                                                              |   |   | 1,100   |   |   |   | 3,000 |   |
| Principal payments on debt                                                                                                                                                                            |   |   | (65     | )      |   |   | (302 | ) |
| Net cash provided by financing activities                                                                                                                                                                                      |   |   | 887     |   |   |   | 2,398 |   |
|  Effect of exchange rate changes on cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | -       |   |   |   | 1 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |    |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 92      |   |   |   | (215 | ) |
| Cash and cash equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 929     |   |   |   | 1,144 |   |
| Cash and cash equivalents at end of period                                                                                                                              |   | $      | 1,021   |   |   | $      | 929 |   |

----

|                                                                                      |   | December 31, |          |
|-------------------------------------------------------------------------------------------|--------|--------------|---------------|
|                                                                                      |   | 2009         |          |   | 2008 |   |
|  Interest paid                                                                       |   | $            | –       |   |   | $ | 226 |   |
|  Non-cash financing and investing transactions:                                      |   |         |          |   |   |   |   |   |
|  Short-term notes and accrued interest exchanged for convertible preferred stock     |   | $            |  – |   |   | $ | 1,040 |   |
|  Dividends on preferred shares                                                       |   | $            | 61            |   |   | $ | 21 |   |
|  Short term notes and accrued interest exchanged for long term notes                 |   | $            | –       |   |   | $ | 638 |   |
|  Accretion of beneficial conversion feature on convertible preferred shares          |   | $            | –       |   |   | $ | 371 |   |
|  Conversion of preferred stock to common stock                                       |   | $            | 166           |   |   | $ | 184 |   |
|  Issuance of long-term debt for payment of interest in kind                          |   | $            | 355           |   |   | $ | – |   |
|  Reclassification of equity linked instrument to derivative liability                |   | $            | 1,353         |   |   | $ | – |   |
|  Debt discount and related liability recorded in connection with long-term debt |   | $            | 3,433         |   |   | $ |  – |   |
|  Warrants issued for interest recorded as derivative liability                       |   | $            | 291           |   |   | $ | – |   |

----

----

|                      | 2009                                                 |   | 2008                                                 |   |
|---------------------------|------------------------------------------------------|--------|------------------------------------------------------|--------|
| Cash in bank              |     $    124 |   |     $    127 |   |
| Money market funds        |      897                    |   |      802                    |   |
|                      |                                                 |   |                                                 |   |
| Cash and cash equivalents |     $ 1,021                      |   |     $    929 |   |
|                      |                                                 |   |                                                 |   |

----

|                                           |   | 2009   |   |   | 2008   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Machinery and equipment                        |   | $      | 1,210  |   |   | $      | 1,202 |   |
| Office furniture and fixtures                  |   |   | 435    |   |   |   | 435 |   |
| Leasehold improvements                         |   |   | 90     |   |   |   | 90 |   |
| Purchased software                             |   |   | 323    |   |   |   | 323 |   |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   |   | 2,058  |   |   |   | 2,050 |   |
| Less accumulated depreciation and amortization |   |   | (2,027 | )      |   |   | (2,002 | ) |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   | $      | 31     |   |   | $      | 48 |   |
|                                           |   |   |   |   |   |   |   |   |

| ·   | Patent numbers 5544255, 5647017, 5818955 and 6064751 involve (a) the electronic capture of a handwritten signature utilizing an electronic tablet device on a standard computer system within an electronic document, (b) the verification of the identity of the person providing the electronic signature through comparison of stored signature measurements, and (c) a system to determine whether an electronic document has been modified after signature. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Patent number 6091835 involves all of the foregoing and the recording of the electronic execution of a document regardless of whether execution occurs through a handwritten signature, voice pattern, fingerprint or other identifiable means. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Patent numbers 5933514, 6212295, 6381344, and 6487310 involve methods and processes related to handwriting recognition developed by the Company over the years.  Legal fees associated with these patents were immaterial and expensed as the fees were incurred. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |    |   |  Expiration |   |   | Estimated OriginalLife |   |   |  2009 |   |   |  2008 |   |
|-------------------------------------------------------|---------|--------|------------------|--------|--------|------------------------|--------|--------|------------|--------|--------|------------|--------|
|        Patent (Various) |    |   | Various          |   |   |                   | 5      |   |       | $      | 9      |       |   | $ | 9 |   |
|        Patent (Various) |    |   | Various          |   |   |                   | 7      |   |       |   | 476    |       |   |   | 476 |   |
|                                                  | 5544255 |   |             |   | 2013   |                   |   |   |  13   |   |   |       | 93     |   |   |   | 93 |   |
|                                                  | 5647017 |   |             |   | 2014   |                   |   |   |  14   |   |   |       | 187    |   |   |   | 187 |   |
|                                                  | 5818955 |   |             |   | 2015   |                   |   |   | 15         |   |   |       | 373    |   |   |   | 373 |   |
|                                                  | 6064751 |   |             |   | 2017   |                   |   |   | 17         |   |   |       | 1,213  |   |   |   | 1,213 |   |
|                                                  | 6091835 |   |             |   | 2017   |                   |   |   | 17         |   |   |       | 4,394  |   |   |   | 4,394 |   |
|                                                  |    |   |             |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |
|                                                  |    |   |             |   |   |                   |   |   |       |   |   |       | 6,745  |   |   |   | 6,745 |   |
| Less accumulated amortization                         |    |   |             |   |   |                   |   |   |       |   |   | (3,974     | )      |   |   | (3,596 | ) |
|                                                  |    |   |             |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |
|                                                  |    |   |             |   |   |                   |   |   |       |   |   | $          | 2,771  |   |   | $ | 3,149 |   |
|                                                  |    |   |             |   |   |                   |   |   |       |   |   |       |   |   |   |   |   |   |

| ·   | The estimated cash flow from products based upon each patent are expected to exceed the value assigned to each patent; |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | There are no legal, regulatory or contractual provisions known to the Company that limit the useful life of each patent to less than the assigned useful life; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | No additional material costs need to be incurred or modifications made in order for the Company to continue to be able to realize the protection afforded by the patents; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company does not foresee any effects of obsolescence or significant competitive pressure on its current or future products, anticipates increasing demand for products utilizing the patented technology, and believes that the current markets for its products based on the patented technology will remain constant or will grow over the useful lives assigned to the patents because of a legal, regulatory and business environment encouraging the use of electronic signatures. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                          |   | 2009   |   |   | 2008   |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|
| Accrued professional services |   | $      | 102    |   |   | $      | 110 |   |
| Rents                         |   |   | 39     |   |   |   | 47 |   |
| Interest                      |   |   | 1      |   |   |   | 75 |   |
| Other                         |   |   | 27     |   |   |   | 4 |   |
| Total                         |   | $      | 169    |   |   | $      | 236 |   |

----

|                               |   | Payments due by period |   |
|------------------------------------|--------|------------------------|--------|
| Contractual obligations            |   | Total                  |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2014 |   |   | Thereafter |   |
| Short-term debt related party (1)  |   | $                      | 5,091  |   |   | $ | 5,091 |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |
| Operating lease commitments (2)    |   |                   | 532    |   |   |   | 292 |   |   |   | 240 |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Total contractual cash obligations |   | $                      | 5,623  |   |   | $ | 5,383 |   |   | $ | 240 |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |

| 1.   | Short-term debt reported on the balance sheet is net of approximately $2,222 in discounts representing the fair value of warrants issued in connection with the Company’s debt financings. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The base rent will increase approximately 3% per annum over the term of the lease, which expires on October 31, 2011. |
|----------------|-----------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|                    | December 31, 2009 | January 1, 2009  |
|-------------------------|-------------------|------------------|
| Expected term           | 0.5 to 3.00 years | .75 to 2.5 years |
| Volatility              | 139.0% - 156.0%   | 141.9% - 171.7%  |
| Risk-free interest rate | 1.70%             | 1.14%            |
| Dividend yield          | 0%                | 0%               |

|                 |   | Value atDecember 31, 2009 |   |   | Quoted prices in active markets |   |    | Significant other observable inputs |   |   | Significant unobservable inputs |   |
|----------------------|--------|---------------------------|--------|--------|---------------------------------|--------|---------|-------------------------------------|--------|--------|---------------------------------|--------|
|                 |   |                      |   |   | (Level 1)                       |   |    | (Level 2)                           |   |   | (Level 3)                       |   |
| Derivative liability |   | $                         | 422    |   |                            | $      | − |                                |   | $      | −                         |   |   | $ | 422 |   |

|   | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                 |   | Derivative Liability |                |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|---------------------|
| Balance at January 1, 2009                                                                                                                           |   | $                    | 1,353               |   |
| Derecognition of derivative related to May 28, 2009 refinancing                                                                                      |   |                 | (875                | ) |
| Additional derivative recorded related to May 28, 2009 refinancing, including quarterly warrant derivative liability issued as paid-in-kind interest |   |                 |     3,637 |   |
| Loss recorded to adjust derivative liability to fair value                                                                                           |   |                 | 5,136               |   |
| Derecognition of derivative related to exercise of warrants in the fourth quarter of 2009                                                            |   |                 | (8,829              | ) |
| Balance at December 31, 2009                                                                                                                         |   | $                    | 422                 |   |

----

|                    |   | Year EndedDecember 31, 2009 | Year EndedDecember 31, 2008 |
|-------------------------|--------|-----------------------------|-----------------------------|
| Risk free interest rate |   | 1.12% - 5.11%               | 2.64% - 5.11%               |
| Expected life (years)   |   | 2.82 – 7.00           | 3.58 – 6.88           |
| Expected volatility     |   | 91.99% - 145.0%             | 91.99% - 99.98%             |
| Expected dividends      |   | None                        | None                        |

|                                                            |   | Year EndedDecember 31, 2009 |   |   | Year EndedDecember 31, 2008 |   |
|-----------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| Research and development                                        |   | $                           | 59     |   |                        | $      | 37 |   |
| Sales and marketing                                             |   |                        | 98     |   |                        |   | 33 |   |
| General and administrative                                      |   |                        | 137    |   |                        |   | 75 |   |
| Director options                                                |   |                        | 24     |   |                        |   | 16 |   |
| Stock-based compensation expense included in operating expenses |   | $                           | 318    |   |                        | $      | 161 |   |

----

|                                                                        |   | December 31, 2009 |   |   | December 31, 2008             |   |
|-----------------------------------------------------------------------------|--------|-------------------|--------|--------|-------------------------------|--------|
|                                                                        |   |  Shares      |   |   | WeightedAverageExercise Price |   | Aggregate Intrinsic Value |   | Weighted Average Remaining Contractual Life |   |   |  Shares |   |   | WeightedAverageExercise Price |   | Aggregate Intrinsic Value |   | Weighted Average Remaining Contractual Life |   |
|                                                                        |   |              |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at beginning of period                                          |   |              | 7,608  |   |                          | $      | 0.48 |   |   |   |   |   |   |   | 6,036 |   |   | $ | 0.59 |   |   |   |   |   |
| Granted                                                                     |   |              | 3,976  |   |                          | $      | 0.10 |   |   |   |   |   |   |   | 1,975 |   |   | $ | 0.15 |   |   |   |   |   |
| Exercised                                                                   |   |              | (85    | )      |                          | $      | 0.09 |   |   |   |   |   |   |   | − |   |   | $ | 0.00 |   |   |   |   |   |
| Forfeited                                                                   |   |              | (1,268 | )      |                          | $      | 0.40 |   |   |   |   |   |   |   | (403 | ) |   | $ | 0.47 |   |   |   |   |   |
|                                                                        |   |              |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Outstanding at period end                                             |   |              | 10,231 |   |                          | $      | 0.34 |   |   |   |   | 3.9 |   |   |   | 7,608 |   |   | $ | 0.48 |   |   |   |   | 4.4 |   |
|                                                                        |   |              |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options vested and exercisable at period end                                |   |              | 8,249  |   |                          | $      | 0.39 |   |   |   |   | 3.3 |   |   |   | 6,043 |   |   | $ | 0.56 |   |   |   |   | 3.9 |   |
|                                                                        |   |              |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average grant-date fair value of options granted during the period |   | $                 | .10    |   |                          |   |   |   |   |   |   |   |   |   | $ | 0.10 |   |   |   |   |   |   |   |   |   |   |

|                                       |                                        |   | Options Outstanding            |   |    | Options Exercisable                                   |   |
|--------------------------------------------|---------------------------------------------|--------|--------------------------------|--------|---------|-------------------------------------------------------|--------|
|    Range of Exercise Prices |                                        |   |   OptionsOutstanding |   |    | Weighted Average Remaining Contractual Life(in years) |   |   | Weighted Average Exercise Price |   |   |   Number Outstanding |   |   | Weighted Average Exercise Price |   |
| $                                          |      0.00 – $0.50      |   |                           |   | 7,235   |                                                  |   |   | 4.3 |   |   | $ | 0.17 |   |   |   | 5,253 |   |   | $ | 0.19 |   |
| $                                          |      0.51 – $1.00 |   |                           |   | 2,908   |                                                  |   |   | 2.8 |   |   | $ | 0.72 |   |   |   | 2,908 |   |   | $ | 0.72 |   |
| $                                          | 1.01 – $2.00                          |   |                           |   | 73      |                                                  |   |   | 2.2 |   |   | $ | 1.66 |   |   |   | 73 |   |   | $ | 1.66 |   |
| $                                          |      2.01 – $2.99 |   |                           |   | − |                                                  |   |   | 0.0 |   |   | $ | 0.00 |   |   |   | − |   |   | $ | 0.00 |   |
| $                                          |      3.00 – $7.50 |   |                           |   | 15      |                                                  |   |   | 0.5 |   |   | $ | 3.56 |   |   |   | 15 |   |   | $ | 3.56 |   |
|                                       |                                        |   |                           |   | 10,231  |                                                  |   |   |   |   |   |   |   |   |   |   | 8,249 |   |   |   |   |   |

|   Nonvested Shares       |   |  Shares |   |   | Weighted AverageGrant-DateFair Value |   |
|------------------------------------|--------|--------------|--------|--------|--------------------------------------|--------|
|  Nonvested at January 1, 2009 |   |         | 1,565  |   |                                 | $      | 0.30 |   |
| Granted                            |   |         | 3,976  |   |                                 | $      | 0.08 |   |
| Forfeited                          |   |         | (1,268 | )      |                                 | $      | 0.11 |   |
| Vested                             |   |         | (2,291 | )      |                                 | $      | 0.25 |   |
| Nonvested                          |   |         | 1,982  |   |                                 | $      | 0.10 |   |

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|                             |   | 2009   |    |   | 2008   |   |
|----------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred tax assets:             |   |   |    |   |   |   |
| Net operating loss carryforwards |   | $      | 23,543  |   |   | $      | 24,959 |   |
| Credit carryforwards             |   |   | 202     |   |   |   | 315 |   |
| Deferred income                  |   |   | 582     |   |   |   | 117 |   |
| Other, net                       |   |   | 156     |   |   |   | 170 |   |
|                             |   |   |    |   |   |   |   |   |
| Total deferred tax assets        |   |   | 24,483  |   |   |   | 25,561 |   |
|                             |   |   |    |   |   |   |   |   |
| Valuation allowance              |   |   | (24,483 | )      |   |   | (25,561 | ) |
|                             |   |   |    |   |   |   |   |   |
| Net deferred tax assets          |   | $      | -       |   |   | $      | - |   |

|                                             |   | 2009   |    |   | 2008   |   |
|--------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Expected federal income tax benefit              |   | $      | (3,673  | )      |   | $      | (1,267 | ) |
| State income tax benefit                         |   |   | (648    | )      |   |   | (330 | ) |
| Expired net operating loss                       |   |   | 2,714   |   |   |   | 1,911 |   |
| Change in valuation allowance and other          |   |   | 1,607   |   |   |   | (314 | ) |
|      Income tax benefit |   | $      | – |   |   | $      | – |   |

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